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Sensex Ends 157 Points Higher; Energy & IT Stocks Witness Buying
Thu, 27 Dec Closing | Monish Vora, TM Team

Indian share markets traded on a positive note throughout the day and ended higher. Gains were seen in the IT sector, energy sector and FMCG sector, while auto stocks and metal stocks witnessed selling pressure.

At the closing bell, the BSE Sensex stood higher by 157 points (up 0.4%) and the NSE Nifty closed higher by 50 points (up 0.5%). The BSE Mid Cap index and the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished on a mixed note. As of the most recent closing prices, the Hang Seng was down by 0.7% and the Shanghai Composite was down by 0.6%. The Nikkei 225 was up 3.9%.

The rupee was trading at 70.29 against the US$.

Reportedly, the rupee weakened marginally in early trade today due to fresh buying of the American currency by importers and banks.

On Wednesday, the rupee trimmed its early gains to settle 8 paise higher at 70.06 against the US$.

In the last few sessions, the rupee has been strengthening against the US$. Last week, dollar came under pressure after the Federal Reserve in its policy statement mentioned that rate hike in the coming year could be restricted to two compared to earlier estimates of three rate hikes next year.

In the news from the pharma space, Dr Reddy's share price was in focus today as the pharma major launched Sevelamer Carbonate for oral suspension, in 0.8 g and 2.4 g packets, a therapeutic equivalent generic version of Renvela (sevelamer carbonate).

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The Renvela brand and generic had US sales of approximately $101 million, according to IMS Health's MAT data for the most recent twelve months ending in October 2018.

In another news, Sun Pharma share price was also in focus today. As per an article in a leading financial daily, Sun Pharma's arm, DUSA Pharmaceuticals received relief from a US court in a patent infringement case.

Reportedly, Massachusetts-based DUSA has been granted preliminary injunctive relief by a federal district court prohibiting defendants Biofrontera Inc, Biofrontera Bioscience GmbH, Biofrontera Pharma GmbH, and Biofrontera AGf from using its confidential and proprietary trade secret information.

Earlier this year, DUSA filed a lawsuit against the Biofrontera defendants in the US District Court for the District of Massachusetts.

The lawsuit had alleged trade secret misappropriation and patent infringement of DUSA's photodynamic therapy patents covering its product.

Note that, innovators in the pharmaceutical industry make use of patents largely. They make heavy use of patents whenever they create a new drug. In one of the articles, we have spoken everything that you need to know about patented drugs, its advantages and its implications. Here's a snippet:

  • "That's how the innovators in the pharmaceutical industry work. They make heavy use of patents whenever they create a new drug. The patent allows them to recoup the high capital expenditure that goes into the research and development (R&D) of new drugs. Companies that have a patent on a particular product are immune from competition for the duration of the patent."

Notably, a number of patent infringement cases have been filed against leading Indian pharma companies and their counterparts in other countries over the last few years.

To know more about the company, you can access to Sun Pharma's Q2FY19 result analysis and Sun Pharma's 2018-19 Annual Report Analysis on our website.

Sun Pharma share price ended the day down by 0.4%.

Moving on to the news from the banking space, shares of public sector undertaking (PSU) banks were witnessing buying interest today on hopes of central government's bank recapitalisation announcement.

Bank of Maharashtra, Central bank, Corporation bank, Dena bank were trading up in the range of 2% to 7%.

Last Thursday, finance minister Arun Jaitley said that the government will infuse Rs 830 billion in public sector banks. Among various objectives, the infusion is aimed at helping better-performing banks under prompt corrective action (PCA) to come out of the category.

While the government has already infused Rs 230 billion into PSBs this year, the remaining Rs 830 billion will be provided in the remaining three months of FY19.

Reportedly, department of financial services sought Parliament's approval via second supplementary demand for grants for additional funds for banks' recapitalization, over and above the budgeted estimate of Rs 650 billion.

Earlier this year, the government pumped in Rs 113.4 billion into five PSBs, including PNB, Allahabad Bank, Indian Overseas Bank, Andhra Bank and Corporation Bank to improve their financial health.

However, using recapitalization bonds can only act as a short-term measure to the crisis afflicting Indian public-sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Recapitalisation of PSBs Over the Years

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

  • "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

My colleague, Ankit Shah, editor of Equitymaster Insider presents an interesting analysis of recapitalisation plan.

Here's a snippet of what he wrote:

  • "The Indian stock markets are at an all-time high. The BSE Sensex has crossed the 33,000 mark.

    Stock prices of public sector banks are up anywhere between 10% and 40%.

    I did some quick math and found that the 21 listed public sector banks have gained approximately Rs 1.1 trillion of market capitalisation in just one day.

    In other words, 50% of the recapitalisation amount of Rs 2.11 trillion has been captured by the stock market in a single trading session".

Ankit is deeply intrigued by the interplay of politics and economics, and how it impacts the stock markets. His aim is to connect the dots and offer deeper insights into the workings of the market.

I would recommend you read his entire article here. (subscription required)

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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Stock Market Updates

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Aug 11, 2020 12:09 PM